Credit Cards Blog

Checkout fee questions answered

I'm getting a lot of questions about a class-action lawsuit that has allowed retailers to charge people a checkout fee if they use a credit card.

The questions come after a provision in a preliminary settlement between retailers and Visa, MasterCard and major banks went into effect on Sunday. The provision allows merchants to recover the costs they are charged to accept credit cards.

Here are four common misconceptions or questions over the new credit card surcharge.

1. Are debit cards subject to the checkout fee?

The checkout fee only affects credit cards, not debit or prepaid cards under any circumstances. Even if the retailer runs a debit card as "credit," the credit card surcharge doesn't apply to you, according to Trish Wexler, a spokeswoman for the Electronic Payments Coalition. The EPC is a trade group that represents Visa, MasterCard and other card payment networks.

2. Who profits from the surcharge -- the banks or retailers?

Retailers who impose a credit card surcharge cannot profit from the fee under the settlement. The fee can only reimburse the cost the retailer is charged by Visa, MasterCard and the banks to run a credit card, called an interchange fee. Typically, stores pay between 1.5 percent and 4 percent of the total purchase each time a customer uses a credit card. Now, if retailers choose, customers will pay for their ability to use a credit card at the store. The extra fee goes to Visa, MasterCard and the banks. However, most retailers already have accounted for the interchange fee in the price of their goods and services and shouldn't need to surcharge to recoup costs, says John Ulzheimer, president of consumer education at SmartCredit.com.

3. My gas station has long charged more for credit card purchases. What has changed?

Retailers, including gas stations, have long been able to offer cash discounts to customers who pay by cash, check or PIN debit cards, Wexler says. Retailers offering cash discounts typically post two prices, one for cash and one for credit cards. Cash discounts are most commonly seen at gas stations and liquor stores.

"A cash discount would have been a fair way for retailers who wanted to steer their customers to other forms of payment," she says. "With surcharging, however, an argument can be made that retailers are double dipping. After all, these fees are already built into prices."

4. Who is charging this checkout fee?

You tell me. National retailers aren't saying what they'll do. I haven't seen any announcements about implementing this credit card surcharge. In fact, several major retailers such as Wal-Mart, Target and Home Depot are opposed to the settlement that provides the option to surcharge. There is some confusion over whether retailers that operate in states that ban surcharging can, at the same time, impose a surcharge in states that allow it. Read more about that in Tuesday's post. The EPC, MasterCard and the attorney for the retailers in the settlement case all say that retailers can impose surcharges in states that allow it, even if they operate in other states that don't. The National Retail Federation says they can't. Maybe that's one for the courts to decide.

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168 Comments

Inthemiddle

February 01, 2013 at 1:08 pm

I sympathize with the sole business owner paying extreme fees to the cc processing companies for the attraction of easy pay for their customers. With the under cut sales of merchandise on the inter net which most retailers pay more than to provide in their stores they already taking the hit for you. When receiving cash from only small few they are the ones that are not living large. Take the time to ask your local "Mom & Pop" the true hardships of serving YOU. Then listen - Your heart will sink!

EMIL

February 01, 2013 at 1:06 pm

I am with most of you and your comments.To the banks,stores and travel,you charge me,you loose me.

Gary

February 01, 2013 at 12:27 pm

If this is to be implemented, it's best to pay cash. Some of my family members budget this way. They have a booklet (with separate storage spaces) and put the money they have budgeted for gas, groceries etc., in the booklet.

I for one can't afford to pay more. Most product outlets charge a handsome amount and banks are doing well too.

Kevin

February 01, 2013 at 12:24 pm

Consider: If you return to paying cash at a retailer who doesn't impose a surcharge (and possibly even retailers who do), you are actually giving that retailer a 1.5% to 4% bonus for accepting your cash... In my humble opinion, this was a stupid lawsuit, and even more stupid settlement — and it's not the banks who are winning; they were already receiving their fee.

john

February 01, 2013 at 11:51 am

I agree with most people, If retailers want to charge a fee on top of the merchandise already being marked up, They will lose my business, From what i understand they have to make it known they are going to do it,My question is if you have service providers that you have auto pay set up will they have to inform you if they are going to do it.

Larry

February 01, 2013 at 11:35 am

When I see the first charge on my credit card or debit card, that will be the LAST time the card will ever be used. I will close the accounts, and deal will CASH only. If everyone do as I do we will not need Credit Cards. Is only a convience. We managed before Credit Cards were invented.

Javier

February 01, 2013 at 11:35 am

We can not expect anything good from the bank monsters whose instinct is to crush us as customers, their minds filled with hunger for money will never be satisfied.
This will be a good opportunity to return to buy "cash" while we, consumers, put the rules of fair play.

(Translated from Spanish)

Charolette

February 01, 2013 at 11:31 am

I couldn't agree more. In this economy- it's unbelievable. It will hurt the retailers as well as the credit card companies. No problem not shopping in these stores and hey, LESS IS MORE!

Wanda

February 01, 2013 at 11:17 am

Same goes here, if I see a charge for fees, I will not shop there anymore.

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